Today’s three big stock charts look at the recent pattern changes in Chesapeake Energy Corporation (NYSE:CHK), Apple Inc. (NASDAQ:AAPL) and United States Steel Corporation (NYSE:X) all of which are among a list of stocks that are triggering technical signals from our models this morning as market volatility grows.
Chesapeake Energy Corporation (CHK)
Our favorite energy stock to trade is on the move again as Chesapeake shares are rallying from their recent bounce from $4.50 with the stock trading at $4.83 this morning. The move is in reaction to higher crude oil prices, but traders will likely take this as yet another opportunity to get ready to short the wounded stock.
- Last week’s support was lent to CHK stock by its lower Bollinger Band, sitting at $4.48 right now. A break below this indicator would have caused even more volatility selling, but for now the trendline offered some short-term support.
- Once again, Chesapeake indicated an oversold situation for its stock when the shares’ RSI hit a reading of 30. This indicator has been incredibly accurate in signaling short-term buying opportunities that result in average gains of 8-11%.
- CHK shares are now trading just below their 20-day moving average, which has been in a declining pattern for months. This trendline has signaled short-term bearish conditions consistently for the last six months. Bottom line, the rally in Chesapeake looks as though it may have run its course.
Apple Inc. (AAPL)
We warned you about Apple last week as the technical picture has been decaying on this technology giant as Apple has been threatening to move below critical support level that would allow the stock to target a 5-10% move lower.
This level was breached yesterday, giving the last of what may be “fair warning” to the AAPL bulls.
- From a chart-level perspective, the $145-price-level has been sensitive as both support and resistance for Apple shares. Shares have been consolidation at this price for most of June, meaning that a break below this consolidated support level will increase selling volume.
- The 20-day moving average just crossed below the 50-day moving average for AAPL shares. This indicates a weakening of the short-term technical picture that most traders will take as a bearish indication for the stock.
- With downside momentum growing, as indicated by the MACD, Apple shares face a test of $142.50 next. A break through this level will set a target of $135 for the stock over the next few weeks.
United States Steel Corporation (X)
Materials stocks are gaining some momentum after lagging the market for months.
Companies like U.S. Steel have endured selling that has the stock down more than 30% year-to-date, but there are signs that a bottom may be forming.
- X shares have spent the better half of the last two months consolidating and forming chart support at $20, as indicated by the green line in the chart above. This chart support is starting to draw buying volume on tests, indicating that technical traders are becoming more active on the name.
- United States Steel shares have spent the last four trading days attempting to break above their 50-day moving average. This would put X stock back in good graces with technical traders and attract even more buying interest.
- While the current short interest ratio for United States Steel stock is only 1.2, that accounts for 16% of the stock’s float. In other words, X stock will benefit from a short covering rally if we see a break above the 50-day.
As of this writing, Johnson Research Group did not hold a position in any of the aforementioned securities.
